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© Clean Energy Finance Corporation
Presentation to Biofuels Association of AustraliaPresentation by Ted Dow, Chief Investment Officer
31 October 2014
CEFC Mission
Accelerate Australia's transformation towards a more competitive economy in a carbon constrained world, by acting as a catalyst to increase investment in emissions reduction
Strategies for success: financing biofuels
AGENDA
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1. Role of the Clean Energy Finance Corporation
2. Potential for growth in Australian biofuel market
3. CEFC finance opportunities for biofuel projects
4. Making biofuel projects bankable
5. Closing Remarks
The Clean Energy Finance Corporation -Our role
Dedicated resources
Private sector finance expertise with public purpose – to pursue energy efficiency and renewable energy across the economy
Sector specialists focused on forming an in-depth understanding clean energy projects, technologies and impact on energy markets
Flexible and persistent
Investment terms tailored to suit the unique characteristics and payback period of the project
Willing to support projects banks find difficult, eg. smaller, more complex or new to the Australian market
Paving the way for others
Facilitate the participation of private sector banks by sharing our expertise, acting as a co-financier and pioneering new solutions
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Outcomes to date
After 18 months in operation the CEFC has …
Committed over $930 million in funds to support over $3
billion of renewable energy, energy efficiency and low
emissions projects
Once constructed, these projects will deliver:
• 700MW of clean electricity generation capacity
• emissions reduction of 4.2 million tonnes CO2e annually.
Unlocked the lowest cost form of abatement, eg. a
positive return of $2.40 per tonne of carbon abated
Helped to deliver lower energy costs for businesses
and improved competiveness across a broad
spectrum of the economy
Why is the CEFC interested in financing biofuel projects?
Fuel combustion is responsible for 2/3 of Australian carbon
emissions (373 MtCO2e generated in 2012; 25% in Transport)*
Fuel switching to biofuels therefore offers a significant and largely
untapped opportunity to lower GHG emissions
While already cost effective, increased deployment will see
technologies move down the cost curve through economies of scale
A viable and secure distributed energy
solution for high cost remote & rural power
generation requirements
A renewable source of energy that can
leverage waste-products and provide full
life-cycle solutions
*Pathways to Deep De-carbonisation by 2050, ClimateWorks© Clean Energy Finance Corporation 5
Potential for the Australian biofuel market
There is significant potential for the Australian biofuel industry both
for domestic consumption and export
Biofuels offer the potential to diversify our domestic energy mix,
improve energy security, build a new export market and increase
demand for agricultural products.
Given the size of the Australian agricultural sector, the key supply
building blocks are in place. Technological know-how can be
imported.
By harnessing these capabilities, Australia has the opportunity to
position itself at the forefront of the global biofuels sector and create
a new economic value added industry
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Current projects in the pipeline
Projects in Queensland, Western Australia, Victoria & New
South Wales including:
• Ethanol from sugar cane/bagasse
• Timber/natural gas to biofuel
• Biofuel from sorghum to power mine sites
• Straw & waste biomass to biofuel
• Biodiesel from soybean
• Wood waste to biofuel
Aggregate pipeline of over $1bn
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CEFC is open many types of biofuel projects
Small and large scale industrial co-generation facilities
Storage, processing, refining, transportation, distribution and re-
fuelling infrastructure
Distributed power generation solutions at individual agricultural,
mine and manufacturing sites
Truck and shipping fleet upgrades &
conversions to biofuel
Some capacity to finance biofuel
research and development
And more…
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Key project bankability factors
1. Technology Considerations
2. Partnership Arrangements
• Feedstock supplier
• Plant Operator
• Power Offtaker
3. Quality of project counterparties
Technology Considerations
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The biofuel market is at an earlier stage of development than other
renewable technologies like wind & solar PV
Underlying technologies involve more complex processes and
optimization requirements
Technologies and feedstock differ substantially across projects
There are few successful demonstration projects in the Australian
market compared to overseas (US, Malaysia and Brazil)
Few financiers have the capability to assess
project risks with confidence
They look for established reference sites &
a track record of success from counterparties
Partnership Arrangements
Financiers look for a fully aligned and long term contracted
partnership structure between the key parties in each project:
• Feedstock Supplier: The commercial viability of project is
dependent on the reliability of feedstock and pricing
• Plant Operator: Skill and experience in this regard are equally
critical to success. (Are farmers the best plant operators?)
• Production Offtaker: This must be a
highly creditworthy party so a reliable
revenue stream is assured.
Often these parties will be cornerstone equity
providers as strategic investors. Non-operating
financial investors may comprise the balance.
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Quality of Project Counterparties
Risk adverse financiers prefer to back parties with deep pockets
and an established track record of success.
The bankability of a project is therefore inextricably linked with the
quality of the parties involved, their financial viability and their
demonstrated ability to competently execute their respective roles.
The involvement of each party must be secured by a
comprehensive set of binding and interlocking long term contracts
These are critical risk mitigating elements and key threshold
factors for financiers
No matter how attractive a project may be, it is not bankable in
the absence of a least one high quality counterparty.
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How the CEFC can support biofuel projects
Committing to provide finance for a project at an earlier stage than
conventional private sector financiers to catalyse / accelerate the
project timetable
Providing technical advice around finance structuring
Leveraging sector expertise and knowledge to educate and provide
comfort to other potential project co-financiers
Helping to attract and work with equity
partners
Provision of Project Finance, Corporate
Loans and Cofinancing Programs
Project bankability and viability is critically dependent upon the
quality of a multitude of parties involved
Each party has different but equally critical role to play.
There is a large portfolio of potential bioenergy projects in Australia.
As yet there are very few bankable partnerships supporting the
delivery of these projects in a manner that can be replicated.
Unlocking the potential of the bioenergy market in Australia, requires
this shortcoming to be addressed as a priority.
The CEFC is available to partner with the
industry to realise the tremendous potential
on offer.
Closing Remarks
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